The Nigerian National Petroleum Corporation (NNPC) will continue to spearhead exploration activities, as oil majors are set to remain sluggish in spending on searching for new discoveries. Companies like Royal Dutch Shell, ExxonMobil, Total, and other majors are expected to continue to cut-down on oil and gas exploration spending for a fifth year in a row in 2018, U.K-based research institute, Consultancy Wood Mackenzie (WoodMac) has said.
Nigeria, through the NNPC has already spent about $3billion on exploration activities, in the northern part of the country, and would, according to the Group Managing Director, NNPC, Maikanti Baru, reinvigorate the search this year. Although the price of crude oil is starting on good note this year, WoodMac says oil majors would retain capital discipline, and rather spend on already discovered resources.
According to the research body, investment in exploration across the world, necessary for offsetting decline may reach $37billion in 2018. This would amount to a decline of seven per cent from a year earlier, and over 60 per cent below the 2014 peak. The company expects only $1 on exploration activities if majors were to spend $7. In the upstream sector, majors would drop investment by about four percent in 2018, the research disclosed.
It said: “This could be the new normal, with the days of one dollar in six or seven going to exploration forever in the past.”
However, while some experts questioned the wisdom in the continued search for hydrocarbon resources in the north, especially as $3billion had already been sunk without making a commercial find, others encourage the Nigerian Government to continue the search.
An analyst at WoodMac, Andrew Latham, told Reuters in an interview that the declines in exploration covers a modest uptick in drilling activities, as lower rig rates and a focused approach on well-charted basins allow firms to do more with their money.
“Investment will be down year-on year, but activity will be flat to slightly higher,” he said.
Exploration is expected to focus on deepwater basins such as Mexico, Brazil, and Guyana, where large discoveries have been made in recent years, offering more confidence that additional resources could be found, he added.